Depending on who you ask, national lockdowns initiated in response to the COVID-19 pandemic have either inflicted irrevocable damage to financial markets or they rehabilitated them by inspiring the largest remote work movement in history.
If we engage with the substance of these opposing perspectives, however, we see that the raw data actually favors the latter.
Time and time again, polls pitched from various angles and on behalf of various agendas have arrived at the same conclusion: Legislation isn’t paralyzing commerce, uncertainty surrounding the novel coronavirus is.
Take a recent PBS survey conducted between June 29th and June 30th. In it, the authors asked participants how uncomfortable they would feel attending hospitality establishments assuming the law permitted them to do so. The results were as follows.
Percentage of people who feel uncomfortable going to various places
- Cinemas: 70%
- Restaurants: 60%
- Public transport: 71%
- Bars: 70%
- Shopping centers: 60%
Comparable values attended gatherings that exceed six people and entering a home occupied by individuals of unknown infection status.
As we delve further into the report, we see similar behaviors exercised by those who maintained discretionary income before, during, and after shelter in place campaigns.
These findings speak to the disparate appraisal of what it means for a sovereign to be economically stable during times of crisis. To many, lifting restrictions and supplying citizens with relief funds are the most influential factors in this regard.
However, in the months since officials allowed establishments to host patrons indoors these criteria proved to be less predictive than initially presumed.
When communities are uncertain of their country’s future they are less likely to invest in it. They may not think about it in those terms, but our blossoming recession accents an out for me and mine mentality among the working, managerial, and wealthy class.
In fact, 25% of affluent Americans account for two-thirds of the decline in spending recorded back in January and recent data from YouGov found that nearly one-third (30%) of Americans used their stimulus checks to pay off debts. Fourteen percent of respondents featured in the report put federal funds toward emergency savings, while the remainder were segmented between cellphone bills, utilities, cable TV, and rent.
“It’s alarming to look at how many Americans used these funds to keep a roof over their head and pay for necessities considering the federal government has not provided clarity about another round of stimulus payments being provided in the near future,” The authors said in a media release.
Affluent demographics who contribute to these trends suggest that a dearth of disposable income is not the root of the problem. Researchers based out of Harvard have been tracking spending habits via credit card data since the start of the COVID-19 pandemic. On balance, the rich have stopped spending, which has resulted in mass layoffs by companies that can’t sustain payroll without consistent revenue. The US relies on the top to inject liquid into various commercial sectors.
Unfortunately, there isn’t a policy prescription capable of suppressing public health concerns, even with the looming threat of complete economic collapse in the foreground.
Ironically, the only resources that can re-mobilize commercial systems ahead of projected economic fallout have very little to do with economics.
The health of the stock market doesn’t really resonate with the public at large. The same goes for our position on the global stage. For would-be spenders, COVID-19 is the most powerful deterrent against participating in trade.
“For higher-income individuals, that spending is still way far off from where it was prior to COVID and it has not recovered as much,” Nathan Hendren, a Harvard economist and co-founder of the Opportunity Insights research team explains. “From the perspective of people who are not living paycheck to paycheck, the main concern here is really fighting the virus. Unless we remove the threat of getting sick or getting your family members sick, it’s hard to imagine that that spending will recover to the pre-COVID levels.”
The uneven economic forecast posited by insiders can only be subverted by dramatic reductions in COVID-19 cases. Unless re-occurring outbreaks are contained, economic recovery is doomed to the abstract.